Emerging Trends in the Colorado Economy

Alison FelixEconomist and Branch ExecutiveFederal Reserve Bank of Kansas City Denver Branch

The views expressed are those of the presenter and do not necessarily reflect the positions of the Federal Reserve Bank of Kansas City or the Federal Reserve System.

2

Employment has been increasing in Colorado and the nation for more than nine years.

90

100

110

120

Dec. '07 Dec. '09 Dec. '11 Dec. '13 Dec. '15 Dec. '17

Sources: Bureau of Labor Statistics / Haver Analytics and author’s calculations.

PAYROLL EMPLOYMENT GROWTHIndex 100 = December 2007, Seasonally Adjusted

Percent Change(Aug. ‘19)

Dec. ‘07 to Present Past Year

U.S. 9.5% 1.4%Colorado 19.1% 2.4%

United States

Colorado

Aug. ‘19

3

Job gains have been broad based across industries in Colorado over the past year.

Source: Bureau of Labor Statistics / Haver Analytics

CHANGE IN PAYROLL EMPLOYMENT, AUGUST 2019Seasonally Adjusted Percent Change Year-over-Year

United StatesColorado

6.5%4.3%

3.3%3.3%

3.0%2.9%

1.4%1.4%1.2%1.2%1.1%

0.4%0.2%0.2%

-0.4%-2.3%

Professional & Business ServicesPrivate Educational Services

Local GovernmentOther Services

Health Care & Social AssistanceLeisure & Hospitality

Natural Resources & MiningWholesale Trade

Transportation & UtilitiesManufacturing

Federal GovernmentState Government

Retail TradeConstruction

Financial ActivitiesInformation

4

Unemployment rates have declined steadily in the U.S. and are now below most estimates of their longer-run levels.

Note: Grey regions indicate recessions.Source: Bureau of Labor Statistics, Federal Reserve Board, NBER / Haver Analytics

UNEMPLOYMENT RATESU-3, Monthly, Seasonally Adjusted

Unemployment Rate(Aug. ‘19) U-3 U-5* U-6*United States 3.7% 4.6% 7.2%Colorado 2.8% 3.8% 6.6%

*U-5 and U-6 values are 12-month moving averages as of Q2 2019 for Colorado and are for August, 2019 for the United States.

0

2

4

6

8

10

12

2000 2003 2006 2009 2012 2015 2018

United StatesColoradoMedian of FOMC

longer-run projections: September 2019

Aug. ‘19

5

Population growth has slowed in Colorado since the 1990s, but people continue to migrate into the state.

Source: Census Bureau / Haver Analytics

CONTRIBUTIONS TO POPULATION CHANGEAnnual

0.0%

1.0%

2.0%

3.0%

4.0%

0

40,000

80,000

120,000

160,000 Net Migration (Left)Births – Deaths

(Left)

Year-over-Year Percent Population Change (Right)

Persons

6

The services sector is expanding at a moderate pace.

Sources: Kansas City Federal Reserve Bank and ISM / Haver Analytics

NON-MANUFACTURING AND SERVICES ACTIVITYDiffusion Index, Seasonally Adjusted, Month-over-Month

U.S. 56.4August 2019

Kansas City 58.4District

August 2019

Contracting

Expanding

40

45

50

55

60

65

Aug. '14 Aug. '15 Aug. '16 Aug. '17 Aug. '18 Aug. '19

7

Manufacturing activity has been strong the past two years, but recent surveys suggest the pace of expansion is slowing.

Sources: Kansas City Federal Reserve Bank and ISM / Haver Analytics

MANUFACTURING ACTIVITYDiffusion Index, Seasonally Adjusted, Month-over-Month

U.S. 49.1August 2019

Kansas City 47.2District

August 2019Contracting

Expanding

30

35

40

45

50

55

60

65

Aug. '09 Aug. '11 Aug. '13 Aug. '15 Aug. '17 Aug. '19

8

Residential construction activity has increased significantly since 2009, but permitting has declined so far this year.

0

8,000

16,000

24,000

32,000

40,000

2001

2004

2007

2010

2013

2016

2019

Source: Census Bureau / Haver Analytics

RESIDENTIAL PERMITSSeasonally Adjusted, Year-to-Date through July

Colorado

Single FamilyMultifamily

Denver

0

5,000

10,000

15,000

20,000

25,000

2001

2004

2007

2010

2013

2016

2019

Single FamilyMultifamily

9

Low inventories have led to strong home price appreciation in recent years in Colorado.

Source: Federal Housing Finance Agency / Haver Analytics

HOME PRICESSeasonally Adjusted, Index 100 = Q2:2009

United States

Colorado

75

100

125

150

175

200

225

'09Q2 '11Q2 '13Q2 '15Q2 '17Q2 '19Q2

Denver

10

Colorado exports have decreased so far this year.

Sources: WISERTrade and Census Bureau

$0.0$1.0$2.0$3.0$4.0$5.0$6.0$7.0$8.0$9.0

'00 '02 '04 '06 '08 '10 '12 '14 '16 '18

COLORADO EXPORTS BY TRADING PARTNERBillions

'18'19

JULY 2019 YEAR-TO-DATEYear-over-Year Percent Change

Total Trade -6.4% SHARE*All Other -1.1 31.5%Japan -9.6 5.5Mexico -25.8 15.1Canada -2.0 17.3 China -6.9 12.5Eurozone -0.7 18.1

*Shares are for 2018

YTD July

11

Oil production in near record-high levels in Colorado.

Sources: Baker Hughes and Energy Information Administration / Haver Analytics

U.S. CO

0

3

6

9

12

15

18

21

0

60

120

180

240

300

360

420

Jun. '07 Jun. '09 Jun. '11 Jun. '13 Jun. '15 Jun. '17 Jun. '19

United States (left)

CRUDE OIL PRODUCTIONMillions of Barrels, Monthly, Seasonally Adjusted

Colorado (right)

12

Expectations for energy activity have weakened as oil prices remain below year-ago levels.

Source: Kansas City Federal Reserve Bank Energy Survey

ENERGY SURVEY ACTIVITY INDICATORSQuarterly Diffusion Index

-100-80-60-40-20

020406080

Q1:

2014

Q2:

2014

Q3:

2014

Q4:

2014

Q1:

2015

Q2:

2015

Q3:

2015

Q4:

2015

Q1:

2016

Q2:

2016

Q3:

2016

Q4:

2016

Q1:

2017

Q2:

2017

Q3:

2017

Q4:

2017

Q1:

2018

Q2:

2018

Q3:

2018

Q4:

2018

Q1:

2019

Q2:

2019

Q4:

2019

(exp

)

Drilling/Business ActivityTotal ProfitsNumber of Employees

13

The agriculture sector continues to struggle as commodity prices remain low.

*Forecast for 2019Source: USDA

0

20

40

60

80

100

120

140

160

1980 1986 1992 1998 2004 2010 2016

2019*

U.S. REAL NET FARM INCOMEBillions, 2019 Dollars

14

Marijuana sales continue to rise in Colorado, but the pace of growth has slowed.

Source: Colorado Department of Revenue

$0

$30

$60

$90

$120

$150

$180

Jul. '14 Jul. '15 Jul. '16 Jul. '17 Jul. '18 Jul. '19

Total Retail Sales

Total Medical Sales

MARIJUANA SALES IN COLORADOMonthly, Millions

15

Similarly, tax collections are above year-ago levels but are rising at a slower pace.

Total Marijuana Tax CollectionsMillions

Total Marijuana Tax Collections as Percent of Total General Fund Revenue

$0

$100

$200

$300 Total Annual TaxCollections

Year-to-Date TaxCollectionsThrough July

0%

1%

2%

3%

MARIJUANA TAX COLLECTIONS IN COLORADO

Note: Total monthly tax collections include state sales tax, retail marijuana sales tax, retail marijuana excise tax, and licenses and fees.Sources: Colorado Department of Revenue & author’s calculations

16

The number of medical stores is declining, but the number of retail stores continues to increase.

Source: Colorado Department of Revenue – Enforcement Division

Jan. '14 Jan. '15 Jan. '16 Jan. '17 Jan. '18 Jan. '190

300

600

900

Medical Stores Recreational StoresMedical Cultivation Recreational CultivationMedical Infused Product Recreational Infused Product

Aug. ‘19

MARIJUANA BUSINESS LICENSES IN COLORADOMonthly

17

The number of occupational licenses in the marijuana industry is also leveling off.

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

Jan. '14 Jan. '15 Jan. '16 Jan. '17 Jan. '18 Jan. '19 Aug. ‘19

Source: Colorado Department of Revenue – Enforcement Division

ACTIVE MARIJUANA OCCUPATIONAL LICENSES IN COLORADOMonthly

18

Employment in the marijuana industry makes up less than one percent of Colorado employment.

Note: In Chart 5, 2014 represents an 11-month change from January to December. Total active marijuana occupational licenses include current total active occupational licenses multiplied by 0.467.Sources: Colorado Marijuana Enforcement Division, Bureau of Labor Statistics and Haver Analytics

Change in Marijuana Employment as a Share of Change in Total Employment

Direct Employment in the Marijuana Industry as a Share of Total Employment

0.1%

0.2%

0.3%

0.4%

0.5%

0.6%

0.7%

Jun. '14 Jun. '16 Jun. '180%1%2%3%4%5%6%7%8%

2014 2015 2016 2017 2018Aug. ‘19

MARIJUANA EMPLOYMENT IN COLORADO

For additional information on the regional economy:http://www.KansasCityFed.org/Denver